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Japan Routes to Market

So you've decided to expand your business in Japan and researched your market. Now it's time to decide how you will register and expand the business. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

Before embarking on a business venture in Japan, it is important to prepare properly. It is advisable to have access to, or employ people, with strong finance and management skills and a good understanding of the Japanese language. An ability to deal with bureaucracy is also an essential attribute. It is also worth noting that if the type of business that is being opened is a branch or a subsidiary, at least one director will need to be a resident in Japan.

Here are your typical options when expanding a business into Japan:

Representative Office
A representative office business does not require registration and can be used as a base to develop a business plan, prepare information or establish relationships in Japan. The business is not allowed to participate in any trade under the company name and although such a setup is virtually tax-free, it can be difficult to attract high quality staff to this type of organization. If the office is active in a restricted sector, such as finance, approval and a license is required

Branch Office
A branch office is a business that is allowed to trade and, consequently, is liable to tax in the same way as a joint stock company. It is relatively cheap and easy to open but one of the representatives must be a Japanese resident.

Kabushiki Kaisha/Joint Stock Company
Most foreign businesses already trading in Japan choose this type of business and it is possible to set up a KK company in less than a month. It is possible to own 100% of the business, allowing you complete control of the nature of your investment. A KK was previously a costly option, but a change in corporate law in 2006 means that it no longer requires Y10million as capital. Functioning in a similar way to a UK corporation, there are no limitations to the amount of shareholders.

LLP (Limited Liability Partnership) or LLC (Limited Liability Company)
A Limited Liability Partnership or Company is where investors are only liable to the amount of their investment. Set up in 2005 to encourage new foreign businesses and entrepreneurs, a limited liability company is ideal for businesses where the main asset is intellectual property. In an LLP or LLC, the company and not the individual hold the property. This protects the individual from having intellectual property seized by creditors, if the business fails in Japan. If the company is set up as a partnership, each partner must have a role in the business. Registration tax is Y60,000, regardless of the size of the business

The BIC
Managed by the British Chamber of Commerce in Japan, and having helped over 25 British companies launch their businesses in Japan, the organization provides companies with a cheap way of setting up a base in Japan.
Using Japanese government initiatives to stimulate business and entrepreneurialism, there are offices, run by both public and private companies, which are made available to foreign investors for 2 months until they establish a permanent location. Generous rental agreements can also be arranged through the same organization. Further information can be found at the Japan External Trade Organization website (JETRO).

Franchising In Japan

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.
The benefits of franchising your business in Japan include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.
Disadvantages of franchising a business in Japan: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.
In Japan, franchising has grown steadily over the last few years and is a popular route to the market, with brands such as KFC represented by franchises in Tokyo.

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